UK BUILDING societies have blasted European regulators' proposals to toughen up lending rules, which they argue would be detrimental to the growth of their businesses .
The European Banking Authority (EBA) is considering tightening the necessary leverage ratio, so that building societies will need more capital in order to lend.
The proposals are based on concerns that specialist lenders, such as building societies, are over-exposed to the housing market and could fall into trouble if the sector overheats.
Hilary McVitty, head of external affairs at the Building Societies Association, has called for a proportionate approach to the rules, as she says that mortgage lending – and building societies in particular – have a lower risk model.
Her comments echo those of The Yorkshire Building Society, which has also come out in criticism of the plans.
“We could either be told to go and raise capital which is very expensive, or we would have to alter our pricing or reduce growth,” corporate affairs chief Andy Caton told the Sunday Telegraph.
“None of these options are particularly palatable.”
The European Commission has urged the EBA to get the new rules in place by the end of the year.